What triggers capital gains tax in Australia?

For property, the contract date is the trigger. The ATO's rental property guidance states that the CGT event occurs when the contract is entered into, rather than when the sale settles, which can place a gain in the earlier tax year⁸. Most real estate is in scope: the ATO lists vacant land, business premises, rental properties, holiday houses and hobby farms, with the main residence generally exempt⁶. Individuals reported $38.6 billion in current-year gains from real estate in 2023–24, more than any other asset type⁵.

The capital gain is generally the difference between the sale proceeds and the property's cost base, which can include the purchase price and certain acquisition, ownership and disposal costs. In the ATO's worked example, a rental property had a $756,000 cost base, comprising a $750,000 purchase price, $30,000 in purchase costs, a $6,000 fence and $10,000 sale costs, less $35,000 of capital works and $5,000 of decline-in-value deductions. A $900,000 sale price produced a $144,000 capital gain. After the 50% CGT discount, the taxable gain was $72,000, or $36,000 for each of the two owners. The gain was reported in 2025–26, the year the sale contract was entered into⁸. What each owner then paid depended on their marginal rate and other income; the rates by range are in the income tax brackets article.

The 2027 reform also applies to property gains accruing after 1 July 2027. For a property held across that date, the discount still applies to the gain accrued to that date, using the asset's value at 1 July 2027; indexation and the 30% minimum tax apply to gains accruing after it. Investors who buy new builds will be able to choose either treatment when they sell⁷.

Giving an asset away does not necessarily avoid CGT. Under the market value substitution rule for property, selling, transferring or gifting property for less than it is worth, where the parties are not dealing at arm's length, is treated as if the market value had been received.

In the ATO's example, a taxpayer sold a rental property to his son for the $120,000 remaining on the mortgage. A professional valuation put the property at $450,000, so the capital proceeds for CGT purposes were $450,000. Two exceptions exist: transfers to a former spouse on a relationship breakdown, where the rule may not apply, and transfers to the trustee of a special disability trust for no payment, where the gain or loss is disregarded¹⁰.

Death is treated under different CGT rules. Assets passing to a beneficiary under a will, intestacy or a deed of arrangement generally do not trigger CGT at that point: the estate's legal personal representative disregards the gain, and CGT generally arises when the beneficiary disposes of the asset. Different treatment can apply where an asset passes to a foreign resident under conditions the ATO sets out, or to a tax-advantaged entity such as a charity or complying super fund. In those cases, the gain or loss is worked out at the date of death and reported in the deceased person's final tax return¹¹.

The largest exemption covers the family home. A main residence is generally exempt from CGT, though the exemption narrows if part of the home is rented out, the home is used for business, the property exceeds 2 hectares, or the owner is a foreign resident who fails the life events test at the CGT event⁶. A former home can also continue to be treated as a main residence for CGT purposes after the owner moves out. A former home used to produce income can be treated as the main residence for up to 6 years after moving out, or indefinitely if it does not produce income, while no other property is treated as the main residence¹³. Under the 2026 reform legislation, the main residence exemption and the four small business CGT concessions are unchanged.

Assets acquired before 20 September 1985 are generally treated as pre-CGT assets. Capital improvements made after that date may themselves be taxed. The 2026 Act's transitional rules cap the exemption's growth. Gains on pre-1985 assets accrued before 1 July 2027 continue to be exempt, while gains accruing after that date fall under the new indexation arrangements, which the factsheet applies to legacy assets bought before 1985⁷.

Other exemptions depend on the type and value of the assets. Cars and motorcycles are exempt outright, with the car exemption applying to vehicles that carry less than 1 tonne and fewer than 9 passengers. Personal use assets such as boats and furniture are taxed only where the asset cost more than $10,000 to acquire. Collectables such as artwork, jewellery and antiques are exempt where they were acquired for $500 or less, with rules preventing assets from being split into separate items to fall below the thresholds. Depreciating assets used solely for taxable purposes sit outside CGT, eligible granny flat arrangements carry no CGT when created, varied or ended, and gambling winnings, unpurchased valour decorations and several classes of compensation and insurance payouts are also exempt⁶.